San Bernardino

SAN BERNARDINO COUNTY Audit Report CONSOLIDATED HANDICAPPED AND DISABLED STUDENTS (HDS), HDS II, AND SERIOUSLY EMOTIONALLY DISTURBED PUPILS PROGRAM Chapter 1747, Statutes of 1984; Chapter 1274, Statutes of 1985; Chapter 1128, Statutes of 1994; and Chapter 654, Statutes of 1996 July 1, 2008, through June 30, 2010 BETTY T. YEE California State Controller March 2019 BETTY T. YEE California State Controller March 27, 2019 The Honorable Ensen Mason, Auditor-Controller/Treasurer/Tax Collector San Bernardino County 268 W. Hospitality Lane, 4th Floor San Bernardino, CA 92415 Dear Mr. Mason: The State Controller’s Office (SCO) audited the costs claimed by San Bernardino County for the legislatively mandated Consolidated Handicapped and Disabled Students (HDS), HDS II, and Seriously Emotionally Disturbed Pupils Program for the period of July 1, 2008, through June 30, 2010. The county claimed and was paid $4,287,156 for the mandated program. Our audit found that $2,320,800 is allowable and $1,966,356 is unallowable. The costs are unallowable primarily because the county claimed costs and revenues based on preliminary unit-of-service and residential placement cost data and claimed unsupported Wraparound Services Program for Children expenses. Following issuance of this audit report, the SCO’s Local Government Programs and Services Division will notify the county of the adjustment to its claims via a system-generated letter for each fiscal year in the audit period. If you have any questions, please contact Lisa Kurokawa, Chief, Compliance Audits Bureau, by telephone at (916) 327-3138. Sincerely, Original signed by JIM L. SPANO, CPA Chief, Division of Audits JLS/as The Honorable Ensen Mason, -2- March 27, 2019 Auditor-Controller/Treasurer/Tax Collector cc: The Honorable Curt Hagman, Chairman San Bernardino County Board of Supervisors Chris Hill, Principal Program Budget Analyst Local Government Unit California Department of Finance Steven Pavlov, Finance Budget Analyst Local Government Unit California Department of Finance Amy Tang-Paterno, Education Fiscal Services Consultant Government Affairs Division California Department of Education Chris Essman, Manager Special Education Division California Department of Education Anita Dagan, Manager Local Government Programs and Services Division State Controller’s Office San Bernardino County Consolidated HDS, HDS II, and SEDP Program Contents Audit Report Summary ............................................................................................................................ 1 Background ........................................................................................................................ 1 Objective, Scope, and Methodology ................................................................................. 3 Conclusion .......................................................................................................................... 4 Follow-up on Prior Audit Findings .................................................................................. 5 Views of Responsible Officials .......................................................................................... 5 Restricted Use .................................................................................................................... 5 Schedule—Summary of Program Costs .............................................................................. 6 Findings and Recommendations ........................................................................................... 7 Attachment—County’s Response to Draft Audit Report San Bernardino County Consolidated HDS, HDS II, and SEDP Program Audit Report Summary The State Controller’s Office (SCO) audited the costs claimed by San Bernardino County for the legislatively mandated Consolidated Handicapped and Disabled Students (HDS), HDS II, and Seriously Emotionally Disturbed Pupils (SEDP) Program for the period of July 1, 2008, through June 30, 2010. The county claimed and was paid $4,287,156 for the mandated program. Our audit found that $2,320,800 is allowable and $1,966,356 is unallowable. The costs are unallowable primarily because the county claimed costs and revenues based on preliminary unit-of-service and residential placement cost data, and claimed unsupported Wraparound Services Program for Children (Wraparound Program) expenses. Background Handicapped and Disabled Students Program Chapter 26 of the Government Code (GC), commencing with section 7570, and Welfare and Institutions Code (WIC) section 5651 (added and amended by Chapter 1747, Statutes of 1984, and Chapter 1274, Statutes of 1985) require counties to participate in the mental health assessment for “individuals with exceptional needs,” participate in the expanded “Individualized Education Program” (IEP) team, and provide case management services for “individuals with exceptional needs” who are designated as “seriously emotionally disturbed.” These requirements impose a new program or higher level of service on counties. On April 26, 1990, the Commission on State Mandates (Commission) adopted the statement of decision for the HDS Program and determined that this legislation imposes a state mandate reimbursable under GC section 17561. The Commission adopted the parameters and guidelines for the HDS Program on August 22, 1991, and last amended them on January 25, 2007. The parameters and guidelines for the HDS Program state that only 10% of mental health treatment costs are reimbursable. However, on September 30, 2002, Assembly Bill 2781 (Chapter 1167, Statutes of 2002) changed the regulatory criteria by stating that the percentage of treatment costs claimed by counties for fiscal year (FY) 2000-01 and prior fiscal years is not subject to dispute by the SCO. Furthermore, this legislation states that, for claims filed in FY 2001-02 and thereafter, counties are not required to provide any share of these costs or to fund the cost of any part of these services with money received from the Local Revenue Fund established by WIC section 17600 et seq. (realignment funds). Furthermore, Senate Bill 1895 (Chapter 493, Statutes of 2004) states that realignment funds used by counties for the HDS Program “are eligible for reimbursement from the state for all allowable costs to fund assessments, psychotherapy, and other mental health services” (emphasis added) and that the finding by the Legislature is “declaratory of existing law.” -1- San Bernardino County Consolidated HDS, HDS II, and SEDP Program The Commission amended the parameters and guidelines for the HDS Program on January 26, 2006, and corrected them on July 21, 2006, allowing reimbursement for out-of-home residential placements beginning July 1, 2004. Handicapped and Disabled Students II Program On May 26, 2005, the Commission adopted a statement of decision for the HDS II Program that incorporated the above legislation and further identified medication support as a reimbursable cost effective July 1, 2001. The Commission adopted the parameters and guidelines for this new program on December 9, 2005, and last amended them on October 26, 2006. The parameters and guidelines for the HDS II Program state, in part: Some costs disallowed by the State Controller’s Office in prior years are now reimbursable beginning July 1, 2001 (e.g., medication monitoring). Rather than claimants re-filing claims for those costs incurred beginning July 1, 2001, the State Controller’s Office will reissue the audit reports. Consequently, we are allowing medication support costs commencing on July 1, 2001. Seriously Emotionally Disturbed Pupils Program GC section 7576 (added and amended by Chapter 654, Statutes of 1996) allows new fiscal and programmatic responsibilities for counties to provide mental health services to seriously emotionally disturbed pupils placed in out-of-state residential programs. Counties’ fiscal and programmatic responsibilities include those set forth in Title 2, California Code of Regulations (CCR), section 60100, which provide that residential placements may be made out-of-state only when no in-state facility can meet the pupil’s needs. On May 25, 2000, the Commission adopted the statement of decision for the SEDP: Out-of-State Mental Health Services Program and determined that Chapter 654, Statutes of 1996, impose a state mandate reimbursable under GC section 17561. The Commission adopted the parameters and guidelines for the SEDP Program on October 26, 2000. The Commission determined that the following activities are reimbursable:  Payment for out-of-state residential placements;  Case management of out-of-state residential placements, which includes supervision of mental health treatment and monitoring of psychotropic medications;  Travel to conduct quarterly face-to-face contacts at the residential facility to monitor level of care, supervision, and the provision of mental health services as required in the pupil’s IEP; and  Program management, which includes parent notifications as required; payment facilitation; and all other activities necessary to ensure that a county’s out-of-state residential placement program meets the requirements of GC section 7576. -2- San Bernardino County Consolidated HDS, HDS II, and SEDP Program The Commission consolidated the parameters and guidelines for the HDS, HDS II, and SEDP Programs for costs incurred commencing with FY 2006-07 on October 26, 2006, and last amended them on September 28, 2012. On September 28, 2012, the Commission stated that Statutes of 2011, Chapter 43, “eliminated the mandated programs for counties and transferred responsibility to school districts, effective July 1, 2011. Thus, beginning July 1, 2011, these programs no longer constitute reimbursable state-mandated programs for counties.” The consolidated program replaced the prior HDS, HDS II, and SEDP mandated programs. The parameters and guidelines establish the state mandate and define reimbursable criteria. In compliance with GC section 17558, the SCO issues claiming instructions to assist local agencies and school districts in claiming mandated program reimbursable costs. Objective, Scope, The objective of our audit was to determine whether costs claimed represent increased costs resulting from the legislatively mandated and Methodology Consolidated HDS, HDS II, and SEDP Program. Specifically, we conducted this audit to determine whether costs claimed were supported by appropriate source documents, were not funded by another source, and were not unreasonable and/or excessive. The audit period was July 1, 2008, through June 30, 2010. To achieve our audit objective, we:  Reviewed annual mandated cost claims filed by the county for the audit period to identify the significant cost components of each claim and determine whether there were any errors or unusual or unexpected variances from year to year. We also reviewed activities claimed to determine whether they adhered to SCO’s claiming instructions and the program’s parameters and guidelines;  Completed an internal control questionnaire by interviewing key county staff. Discussed the claim preparation process with county staff to determine what information was obtained, who obtained it, and how it was used;  Reviewed source documents to verify that all out-of-state residential placement providers claimed were organized and operated on a non- profit basis;  Verified residential placement costs claimed by tracing a non- statistical sample of $2,111,112 out of $10,965,821 in residential placement costs to payment reports and warrants. We did not project sample errors to the intended (total) population;  Verified out-of-county residential treatment costs claimed by tracing a non-statistical sample of $297,203 out of $610,739 in out-of-county residential treatment costs to payment reports and warrants. We did not project sample errors to the intended (total) population;  Validated unit-of-service reports by tracing a non-statistical sample of 100 out of 28,523 client visits from unit-of-service reports to client files. We did not project sample errors to the intended (total) population; -3- San Bernardino County Consolidated HDS, HDS II, and SEDP Program  Validated all unit rates claimed by reconciling the claimed rates to rates reported in the county’s cost reports submitted to the California Department of Mental Health (CDMH) and verifying that contractor rates used were consistent with the county’s contract settlement policy;  Verified the eligibility of Wraparound Program expenses claimed by tracing a non-statistical sample of payments totaling $270,984 out of the $1,866,795 in Wraparound Program costs to the client files. After discussions with county staff, we projected the allowable sample rate of 6.48% to the intended (total) population;  Reviewed indirect costs to determine whether they were properly computed and applied;  Reviewed offsetting revenues to determine whether all relevant sources were identified and properly computed and applied; and  Recalculated allowable costs using our audited data, including unit- of-service reports and the appropriate unit rates. GC sections 12410, 17558.5, and 17561 provide the legal authority to conduct this audit. We conducted this performance audit in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objective. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objective. We limited our review of the county’s internal controls to gaining an understanding of the transaction flow and claim preparation process as necessary to develop appropriate auditing procedures. Our audit scope did not assess the efficiency or effectiveness of program operations. We did not audit the county’s financial statements. Conclusion As a result of performing the audit procedures, we found instances of noncompliance with the requirements described in our audit objective. We found that the county claimed unsupported and ineligible costs, and overstated costs that were funded by other sources, as quantified in the accompanying Schedule and described in the Findings and Recommendations section of this report. For the audit period, San Bernardino County claimed and was paid $4,287,156 for costs of the legislatively mandated Consolidated HDS, HDS II, and SEDP Program. Our audit found that $2,320,800 is allowable and $1,966,356 is unallowable. Following issuance of this audit report, the SCO’s Local Government Programs and Services Division will notify the county of the adjustment to its claims via a system-generated letter for each fiscal year in the audit period. -4- San Bernardino County Consolidated HDS, HDS II, and SEDP Program Follow-up on We have not previously conducted an audit of the county’s legislatively mandated Consolidated HDS, HDS II, and SEDP Program. Prior Audit Findings Views of We issued the draft audit report on February 11, 2019. Ensen Mason, Responsible Auditor-Controller/Treasurer/Tax Collector, San Bernardino County, responded by letter dated February 21, 2019, agreeing with the findings. Officials This final audit report includes the county’s response. Restricted Use This report is solely for the information and use of San Bernardino County, the California Department of Finance, the California Department of Education, and the SCO; it is not intended to be and should not be used by anyone other than these specified parties. This restriction is not intended to limit distribution of this audit report, which is a matter of public record and is available on the SCO website at www.sco.ca.gov. Original signed by JIM L. SPANO, CPA Chief, Division of Audits March 27, 2019 -5- San Bernardino County Consolidated HDS, HDS II, and SEDP Program Schedule— Summary of Program Costs July 1, 2008, through June 30, 2010 Cost Actual Costs Allowable Audit Elements Claimed1 per Audit Adjustment Reference2 July 1, 2008, through June 30, 2009 Direct costs: Referral and mental health assessments $ 418,869 $ 427,356 $ 8,487 Finding 1 Authorize/Issue payments to providers 6,527,405 5,690,664 (836,741) Finding 2 Psychotherapy/Other mental health services 3,032,203 2,360,954 (671,249) Finding 1, 3 Total direct costs 9,978,477 8,478,974 (1,499,503) Indirect costs 2 36,356 242,729 6,373 Finding 4 Total direct and indirect costs 10,214,833 8,721,703 (1,493,130) Less other reimbursements (8,888,120) (8,102,109) 7 86,011 Finding 5 Total program cost $ 1,326,713 619,594 $ ( 707,119) Less amount paid by the State (1,326,713) Amount paid in excess of allowable claimed costs $ (707,119) July 1, 2009, through June 30, 2010 Direct costs: Referral and mental health assessments $ 283,481 $ 287,622 $ 4,141 Finding 1 Authorize/Issue payments to providers 6,526,676 5,698,996 (827,680) Finding 2 Psychotherapy/Other mental health services 3,196,790 2,079,512 (1,117,278) Finding 1, 3 Total direct costs 10,006,947 8,066,130 (1,940,817) Indirect costs 1 74,458 166,385 (8,073) Finding 4 Total direct and indirect costs 10,181,405 8,232,515 (1,948,890) Less other reimbursements (7,220,962) (6,531,309) 6 89,653 Finding 5 Total program cost $ 2,960,443 1,701,206 $ (1,259,237) Less amount paid by the State (2,960,443) Amount paid in excess of allowable claimed costs $ (1,259,237) Summary: July 1, 2008, through June 30, 2010 Direct costs: Referral and mental health assessments $ 702,350 $ 714,978 $ 1 2,628 Finding 1 Authorize/Issue payments to providers 13,054,081 1 1,389,660 (1,664,421) Finding 2 Psychotherapy/Other mental health services 6,228,993 4,440,466 (1,788,527) Finding 1, 3 Total direct costs 19,985,424 1 6,545,104 (3,440,320) Indirect costs 4 10,814 409,114 (1,700) Finding 4 Total direct and indirect costs 20,396,238 1 6,954,218 (3,442,020) Less other reimbursements (16,109,082) (14,633,418) 1,475,664 Finding 5 Total program cost $ 4,287,156 2,320,800 $ (1,966,356) Less amount paid by the State (4,287,156) Amount paid in excess of allowable claimed costs $ (1,966,356) _________________________ 1 The county did not separately report direct and indirect costs on its claims. We recategorized the county’s direct and indirect costs into the appropriate claim components based on information that the county provided. 2 See the Findings and Recommendations section. -6- San Bernardino County Consolidated HDS, HDS II, and SEDP Program Findings and Recommendations FINDING 1— During testing of assessment and treatment costs, we found that the county overstated costs by $93,762 for the audit period. The county claimed Overstated assessment and treatment costs within the Referral & Mental Health assessment and Assessments and the Psychotherapy/Other Mental Health Services cost treatment costs components. Costs were understated in FY 2008-09 and overstated in FY 2009-10 because the county misinterpreted the parameters and guidelines and claimed costs not based on actual units-of-service. The county used preliminary unit-of-service reports to determine claimed assessment and treatment costs. As a result, the county claimed costs that were not fully based on actual costs to implement the mandated programs. For the audit period, the county provided unit-of-service reports that represented finalized units-of-service rendered to eligible clients. We reviewed the reports and noted that reported units did not reconcile to claimed units for either fiscal year under audit. We verified, on a sample basis, support for reported services. We selected a non-statistical haphazard sample of service transactions. We found that all clients were eligible for the program and services were properly supported by a progress note, with a few exceptions. We verified unit rates used to compute costs of county-operated facilities and contract providers. In our review, we found that the county correctly claimed costs based on rates from annual cost reports and provider contracts. We recalculated allowable costs based on actual, supported units-of- service provided to eligible clients using appropriate unit rates that represented actual costs to the county. After our recalculation, we found that the county understated costs by $14,050 in FY 2008-09 and overstated costs by $107,812 in FY 2009-10. The following table summarizes the overstated assessment and treatment costs claimed: Amount Amount Audit Claimed Allowable Adjustment FY 2008-09 Referral & mental health assessments $ 4 18,869 $ 4 27,356 $ 8,487 Psychotherapy/Other mental health services 2,297,668 2,303,231 5,563 Subtotal $ 2,716,537 $ 2,730,587 $ 14,050 FY 2009-10 Referral & mental health assessments $ 2 83,481 $ 2 87,622 $ 4,141 Psychotherapy/Other mental health services 2,128,220 2,016,267 (111,953) Subtotal $ 2,411,701 $ 2,303,889 $ (107,812) Summary Referral & mental health assessments $ 7 02,350 $ 7 14,978 $ 12,628 Psychotherapy/Other mental health services 4,425,888 4,319,498 (106,390) Total $ 5,128,238 $ 5,034,476 $ (93,762) -7- San Bernardino County Consolidated HDS, HDS II, and SEDP Program Criteria Section IV (H) of the program’s parameters and guidelines provides that reimbursement is allowable for mental health services when required by the pupil’s IEP. These services include assessment, collateral, case management, individual and group psychological therapy, medication monitoring, intensive day treatment, and day rehabilitation services. The parameters and guidelines further specify that when providing mental health treatment services, socialization and vocation services are not reimbursable. Section IV of the parameters and guidelines specifies that the State will reimburse only actual increased costs incurred to implement mandated activities that are supported by source documents showing the validity of such costs. Recommendation No recommendation is applicable, as the consolidated program is no longer mandated. For other mandated programs, we recommend that the county:  Follow the mandated program claiming instructions and the parameters and guidelines when preparing its mandated cost claims; and  Ensure that claimed costs are based on actual costs. County’s Response The county agreed with the finding. FINDING 2— During testing of residential placement costs, we found that the county overstated costs by $1,664,421 for the audit period. The county claimed Overstated residential residential placement costs within the Authorize/Issue Payments to placement costs Providers cost component. Costs were overstated because the county misinterpreted the parameters and guidelines and did not claim actual costs. The county claimed duplicative, unsupported, and ineligible vendor costs. The county claimed residential placement costs that included both board- and-care and mental health treatment costs. San Bernardino County Human Services (SBCHS) tracks and makes payments for board-and-care and out-of-state treatment services within the county’s aid payment system. The county’s Department of Behavioral Health (DBH) tracks and makes payments for the in-state residential treatment costs. As DBH is fiscally responsible for mental health treatment costs, DBH completes a monthly interagency transfer to SBCHS for the out-of-state mental health treatment costs. Both departments reported the same out-of-state treatment costs to the auditor-controller, resulting in a duplication of costs claimed. To avoid any duplication, we removed the $1,477,521 in out-of-state treatment costs claimed by DBH. -8- San Bernardino County Consolidated HDS, HDS II, and SEDP Program We verified, on a sample basis, support for residential services. In our review, we found that the county had claimed costs based on the month when services were paid rather than when they were incurred. As a result, the county claimed costs from outside the audit period and left potentially eligible costs unclaimed. We requested updated reports based on the effective month of residential placement. After reviewing the updated reports, we found that the county had overstated residential placement costs by $72,817 for the audit period. Furthermore, we found payment inaccuracies during testing that led to an additional overstatement of $26,840. We verified the eligibility of each vendor claimed using supporting documentation provided by the county and by performing an online search. As a result of our review, we found that the county had claimed ineligible out-of-state residential placement costs of $87,243 from facilities that are owned and operated on a for-profit basis. Only placements in facilities that are owned and operated on a nonprofit basis are eligible for reimbursement. Based on the aforementioned adjustments, we recalculated supported costs based on the month when costs were incurred. We excluded costs from for-profit vendors and duplicate costs claimed by both county departments. The following table summarizes the overstated residential placement costs claimed: Fiscal Amount Amount Audit Year Claimed Allowable Adjustment 2008-09 $ 6,527,405 $ 5,690,664 $ ( 836,741) 2009-10 6 ,526,676 5 ,698,996 (827,680) Total $ 13,054,081 $ 11,389,660 $ (1,664,421) The following table summarizes the calculation of allowable costs: Fiscal Year Authorize/Issue Payments to Providers 2008-09 2009-10 Total Total claimed costs $ 6,527,405 $ 6,526,676 $ 13,054,081 Duplicate out-of-state treatment costs (726,657) (750,864) (1,477,521) FY 2007-08 costs claimed (147,531) - (147,531) Ineligible vendor costs - ( 87,243) ( 87,243) Incorrect payments ( 18,363) (8,477) ( 26,840) Unclaimed costs 55,810 18,904 74,714 - Allowable costs $ 5,690,664 $ 5,698,996 $ 11,389,660 Criteria Section IV (G) of the parameters and guidelines specify that the mandate is to reimburse counties for payments to service vendors providing placement of seriously emotionally disturbed pupils in out-of-home residential facilities as specified in GC section 7581 and 2 CCR 60200. -9- San Bernardino County Consolidated HDS, HDS II, and SEDP Program 2 CCR 60100, subdivision (h), specifies that out-of-state residential placement shall be made in residential programs that meet the requirement of WIC section 11460, subdivision (c)(2) through (3). Subdivision (c)(3) states that reimbursement shall be paid only to a group home organized and operated on a nonprofit basis. Section IV (G) of the parameters and guidelines also provide that WIC section 18355.5 applies to this program and prohibits a county from claiming reimbursement for its 60% share of the total residential and non- educational costs for a seriously emotionally disturbed child placed in an out-of-home residential facility, if the county claims reimbursement for these costs from the Local Revenue Fund identified in WIC section 17600 and receives these funds. Recommendation No recommendation is applicable, as the consolidated program is no longer mandated. For other mandated programs, we recommend that the county:  Follow the mandated program claiming instructions and the parameters and guidelines when preparing its mandated cost claims; and  Ensure that claimed costs include only eligible costs, are based on actual costs, and are properly supported. County’s Response The county agreed with the finding. FINDING 3— During testing of mental health services provided to Wraparound Program clients, we found that the county overstated costs by $1,682,137 for the Unsupported audit period. The county claimed Wraparound Program costs within the Wraparound Psychotherapy/Other Mental Health Services cost component. Costs are Program costs overstated because the county misinterpreted the parameters and guidelines and claimed ineligible or unsupported Wraparound Program services. The Wraparound Program is a separate program from the legislatively mandated program under audit. The program provides funding for a wide array of services with the intention of allowing children and youth to live at home in lieu of being placed in a residential facility. Clients may receive Wraparound Program services concurrently with the mandated program. Wraparound Program services may be eligible for reimbursement through the mandated program as long clients maintain their eligibility, the services claimed are eligible for reimbursement in accordance with the mandate, and the services are properly documented. Similar to residential placements, the California Department of Social Services (CDSS) provides 40% offsetting reimbursement for Wraparound Program costs. For the audit period, the county provided detailed reports from its aid payment system that represented total payments made to contract vendors for Wraparound Program services provided to eligible mandate clients. -10- San Bernardino County Consolidated HDS, HDS II, and SEDP Program We reviewed the reports and noted that the reported payments did not reconcile to the claimed amounts for the audit period. Payments did not reconcile because the county used preliminary Wraparound Program report information to determine claimed costs. Furthermore, the county included payments for services that occurred outside of the audit period. We verified, on a sample basis, support for the Wraparound Program vendor payments claimed. We selected a non-statistical, haphazard sample of Wraparound Program clients to determine whether the payments claimed were for services eligible for reimbursement through the mandated program. During testing, we found that the county was only able to support 6.48% of the total costs sampled as eligible services. After discussion with county staff, the county and auditors agreed to apply the allowable rate found during testing to the total amount of Wraparound Program services claimed to determine allowable costs. After our recalculation, we found that the county overstated claimed Wraparound Program costs by $676,812 in FY 2008-09 and $1,005,325 in FY 2009-10. Furthermore, we found the county did not offset Wraparound Program provider costs with the CDSS 40% offsetting reimbursement. We applied the reimbursement percentage to allowable Wraparound Program costs and included the revenues in the offsetting reimbursement component (see Finding 5). The following table summarizes the overstated Wraparound Program costs claimed: Fiscal Amount Amount Audit Year Claimed Allowable Adjustment 2008-09 $ 7 34,535 $ 57,723 $ ( 676,812) 2009-10 1,068,570 6 3,245 (1,005,325) Total $ 1,803,105 $ 120,968 $ (1,682,137) Criteria Section IV (H) of the program's parameters and guidelines provides that reimbursement is allowable for mental health services when required by the pupil’s IEP. These services include assessment, collateral, case management, individual and group psychological therapy, medication monitoring, intensive day treatment, and day rehabilitation services. The parameters and guidelines further specify that when providing mental health treatment services, socialization and vocation services are not reimbursable. Section IV of the parameters and guidelines specifies that the State will reimburse only actual increased costs incurred to implement mandated activities that are supported by source documents showing the validity of such costs. -11- San Bernardino County Consolidated HDS, HDS II, and SEDP Program Recommendation No recommendation is applicable, as the consolidated program is no longer mandated. For other mandated programs, we recommend that the county:  Follow the mandated program claiming instructions and the parameters and guidelines when preparing its mandated cost claims; and  Ensure that claimed costs include only eligible costs that are properly supported. County’s Response The county agreed with the finding. FINDING 4— During analysis of indirect costs, we found that the county overstated indirect costs by $1,700 for the audit period. The county correctly Overstated indirect calculated its indirect cost rate. However, the rate was applied to direct costs unit costs based on preliminary unit-of-service reports. The county used a method that was consistent with allocations in the cost reports that it submitted to the CDMH. The county then applied its indirect cost rate to direct assessment and treatment costs of county-operated facilities, based on preliminary unit-of-service reports. We recalculated the indirect costs by applying the claimed indirect cost rate to allowable direct costs of assessment and treatment services provided at county-operated facilities in the Referral & Mental Health Assessments and the Psychotherapy/Other Mental Health Services cost components. After our recalculation, we found that the county understated indirect costs by $6,373 for FY 2008-09 and overstated indirect costs by $8,073 for FY 2009-10. The following table summarizes the overstated indirect costs claimed: Fiscal Year 2008-09 2009-10 Total Direct asssessment and treatment costs $ 2,342,946 $ 1,943,747 Indirect cost rate 10.36% 8.56% Allowable indirect costs 242,729 166,385 Claimed indirect costs 236,356 174,458 Audit adjustment $ 6,373 $ (8,073) $ ( 1,700) Criteria Section V of the parameters and guidelines states that indirect costs incurred in the performance of the mandated activities and adequately documented are reimbursable. The parameters and guidelines further state that, to the extent that CDMH has not already compensated reimbursable administration costs from categorical funding sources, the costs may be claimed. -12- San Bernardino County Consolidated HDS, HDS II, and SEDP Program Recommendation No recommendation is applicable, as the consolidated program is no longer mandated. For other mandated programs, we recommend that the county:  Follow the mandated program claiming instructions and the parameters and guidelines when preparing its mandated cost claims; and  Ensure that indirect cost rates are applied to eligible and supported direct costs. County’s Response The county agreed with the finding. FINDING 5— During our analysis of offsetting reimbursements, we found that the county overstated reimbursements by $1,475,664 for the audit period. The Overstated offsetting overstatement resulted primarily because the county erroneously claimed reimbursements an interagency transfer between county departments for out-of-state mental health treatment as an offsetting revenue, and applied the CDSS 40% reimbursement to ineligible direct costs. Furthermore, the county used preliminary unit-of-service reports to determine total Short- Doyle/Medi-Cal Federal Financing Participation (SD/MC) and Early and Periodic Screening, Diagnosis, and Treatment (EPSDT) reimbursements and did not offset its claim with the CDSS 40% reimbursement of Wraparound Program costs. Offsetting reimbursements are overstated because the county misinterpreted the parameters and guidelines, and applied incorrect reimbursements to ineligible or unsupported services. We recalculated allowable offsetting reimbursements for all relevant funding sources and applied appropriate rates for Medi-Cal and EPSDT to eligible direct costs. We excluded offsetting reimbursements related to ineligible and unsupported direct costs. We applied all relevant revenues to the full extent of funding provided, including Individuals with Disabilities Education Act (IDEA) funds and CDMH categorical grants. We recalculated reimbursements for SEDP and Wraparound Program costs by applying the CDSS 40% reimbursement rate to allowable direct costs. We removed the entire $1,394,468 in interagency transfers from DBH to SBCHS, for the cost of out-of-state residential treatment services. We removed these transfers because they were internal accounting transactions and did not represent an actual offsetting reimbursement for the county. After our recalculations, we found that the county overstated offsetting reimbursements by $786,011 in FY 2008-09 and $689,653 in FY 2009-10. -13- San Bernardino County Consolidated HDS, HDS II, and SEDP Program The following table summarizes the adjustment to offsetting reimbursements: Amount Amount Audit Claimed Allowable Adjustment FY 2008-09 SD/MC $ ( 845,186) $ ( 725,762) $ 119,424 EPSDT (474,190) (376,774) 97,416 CDMH categorical grant (1,330,748) (1,330,748) - Federal IDEA grant (1,180,486) (1,180,486) - CDSS 40% offset (2,042,747) (2,178,279) (135,532) Local revenue (realignment) (2,238,720) (2,238,720) - Other – SED interagency transfer (727,792) - 7 27,792 Other – Recovery of Aid (48,251) (48,251) - CDSS 40% wraparound offset - (23,089) (23,089) Subtotal $ (8,888,120) $ (8,102,109) $ 786,011 FY 2009-10 SD/MC $ ( 602,432) $ ( 750,802) $ ( 148,370) EPSDT (292,508) (362,662) (70,154) Federal IDEA grant (1,180,486) (1,180,486) - CDSS 40% offset (2,429,076) (2,162,277) 2 66,799 Local revenue (realignment) (2,028,954) (2,028,954) - Other – SED interagency transfer (666,676) - 6 66,676 Other – Recovery of Aid (20,830) (20,830) - CDSS 40% wraparound offset - (25,298) (25,298) Subtotal $ (7,220,962) $ (6,531,309) $ 689,653 Summary SD/MC $ (1,447,618) $ (1,476,564) $ (28,946) EPSDT (766,698) (739,436) 27,262 CDMH categorical grant (1,330,748) (1,330,748) - Federal IDEA grant (2,360,972) (2,360,972) - CDSS 40% offset (4,471,823) (4,340,556) 1 31,267 Local revenue (realignment) (4,267,674) (4,267,674) - Other – SED interagency transfer (1,394,468) - 1,394,468 Other – Recovery of Aid (69,081) (69,081) - CDSS 40% wraparound offset - (48,387) (48,387) Total $ (16,109,082) $ (14,633,418) $ 1,475,664 Criteria Section VII of the parameters and guidelines specify that any direct payments (categorical funds, SD/MC, EPSDT, IDEA, and other reimbursements) received from the State that are specifically allocated to the program, and/or any other reimbursements received as a result of the mandate, must be deducted from the claim. Section IV (G) of the parameters and guidelines provides that counties are eligible to be reimbursed for 60% of residential costs. The parameters and guidelines also provide that WIC section 18355.5 applies to this program and prohibits a county from claiming reimbursement for its 60% share of the total residential and non-educational costs for a seriously emotionally -14- San Bernardino County Consolidated HDS, HDS II, and SEDP Program disturbed child placed in an out-of-home residential facility, if the county claims reimbursement for these costs from the Local Revenue Fund identified in WIC section 17600 and receives these funds. Recommendation No recommendation is applicable, as the consolidated program is no longer mandated. For other mandated programs, we recommend that the county:  Follow the mandated program claiming instructions and the parameters and guidelines when preparing its mandated cost claims; and  Ensure that offsetting reimbursements are identified and properly applied to program costs. County’s Response The county agreed with the finding. -15- San Bernardino County Consolidated HDS, HDS II, and SEDP Program Attachment— County’s Response to Draft Audit Report State Controller’s Office Division of Audits Post Office Box 942850 Sacramento, CA 94250 http://www.sco.ca.gov S18-MCC-0017